Your bookkeeper works for you. You are their client, but you are also the boss! This can be a very challenging truth when you are not sure how to supervise or approve the important bookkeeping work that you are paying for. Even if your bookkeeper is a contractor, you must still determine if their work meets your requirements.
So, how do you supervise your bookkeeper? If you don’t know a lot about bookkeeping, accounting, or finance, here are a few places to start.
Monthly Reporting
Ensure your accounting software has a chart of accounts that are coded to create working reports. Basic reports that you should be reviewing every month include:
Profit and Loss
Even if you only have basic financial literacy, you will be surprised how much you know about your business. Reviewing your profit and loss statement (income and expenses) each month will alert you to duplicate expenses (ie: why is the insurance expense so high this month?) or mis-dated entries (ie: the leasing expense seems low, but we pay that monthly).
Balance Sheet
Balance sheets can be intimidating to review. Try starting with cash. Does the cash on the balance sheet agree with what you think you have in the bank? If not, ask your bookkeeper to explain any discrepancies. What about your prepaid expenses? For example, did you pay property tax in a large lump sum in July and has that been drawn down to roughly half by December?
Accounts Payable
Which suppliers do you owe and do you see them represented at month end? If a bill that you received is not recorded at the amount you recall, or absent from the list of payables, you may not have provided it to the bookkeeper, or they may have overlooked it, or recorded it incorrectly. Reviewing this report ensures you don’t miss important payments, or pay inappropriate amounts.
Accounts Receivable
Which customers owe you? Do you see them represented on the account receivable report? If not, why not? Do you see a customer with a large amount owing, but remember they paid you? Ask your bookkeeper if they are getting the required information from you and in a timely manner.
Record Upcoming Due Dates
Ultimately, it is your responsibility as a business owner to know when corporate income tax, sales tax, worksafe premiums, payroll deductions, and other filings are due and payable. Mark these dates on your calendar and ensure your bookkeeper is providing you with enough time to review prepared filings, ask questions, and arrange payment before the deadlines.
Limited supervision is better than no supervision. It also provides a chance for you to gain control over your business and learn about how to use financial terminology. Start small and add supervisory tasks as time allows. Practice makes perfect.
Cedar Creek CPA 